By Casey Chumrau, USW Market Analyst
This month, Egypt’s General Authority for Supply Commodities (GASC) accepted its first and second bids for U.S. wheat in marketing year 2013/14 (June to May). Considering the significant freight advantage enjoyed by Black Sea and European suppliers, the latest GASC tender results indicate that U.S. wheat is once again competitive even in more price sensitive markets.
The Chicago Board of Trade soft red winter (SRW) March futures contract lost 21 percent of its value between Oct. 24, 2013, and Jan. 17, 2014. The FOB price for February delivery fell 9 percent in that same period. That translated to a drop of $26 per metric ton (MT) that helped put SRW in a very competitive range compared to every other supplier.
Between the two tenders, GASC purchased 115,000 MT of SRW at $265 per MT on a FOB basis for February delivery. Freight costs of $38 per MT from the Gulf put the total price at $303 per MT. In the first tender, U.S. wheat was the least expensive of all the bids by $7 per MT or more. GASC purchased an additional 55,000 MT of SRW in the second tender. It also purchased wheat from Ukraine, France and Russia for $301 per MT cost and freight.
GASC’s recent tender results also appear to reflect a buying pattern. The January tenders mark the third consecutive year in which the Egyptian government’s wheat importer made its first U.S. purchase around the beginning of the calendar year.
USDA expects Egypt, the world’s top wheat buyer, to import 10.5 million metric tons (MMT) this year, which would tie for the third highest on record for the country. On average the last five years, Russia and Ukraine accounted for 54 percent of the Egyptian market while the United States captured 17 percent. However, the availability of Black Sea wheat has been extremely variable in that time.
As the prices of depleted Russian grain supplies increased in 2012/13, for example, GASC turned to U.S. wheat for the first time on Feb. 11, 2012. By the end of the marketing year (May 2012), GASC and other private Egyptian buyers had imported 948,000 MT of U.S. wheat. Faced with even lower Black Sea supplies in 2012/13, GASC completed its first U.S. wheat purchase of the year on Dec. 1, 2013. Total U.S. sales to Egypt reached 1.71 MMT in 2012/13, accounting for 20 percent of total wheat imports.
With the recent downward price trend, current U.S. wheat export commitments do not extend much past the end of February. USDA reported that total known outstanding sales and accumulated exports of all U.S. wheat classes for 2013/14 through Jan. 9 are 24.9 MMT. That is 25 percent more than the 19.8 MMT total last year at this date. USDA expects 2013/14 U.S. wheat exports to reach 30.6 MMT or nearly 12 percent more than in 2012/13. Clearly, buyers like GASC recognize the value of U.S. wheat and are taking advantage of excellent price competitiveness.
Source : uswheat.org